A BIT PALTRY, BUT THE RIGHT DIRECTION:

Clinton talks ‘baby bonds’ (Athena Jones, 9/28/07, NBC: First Read)

Every baby born in America should receive money that can later be used to pay for college, Clinton told the crowd at the Congressional Black Caucus annual legislative conference in Washington on Friday.

"I like the idea of giving every baby born in America a $5,000 account that will grow over time, so when that young person turns 18, if they have finished high school they will be able to access it to go to college," Clinton said, calling it one way to give young people a chance to save money tax free.

Too little money, for too small a purpose, in too conservative an investment instrument. She should go at least as far as Paul O'Neill, A new idea for Social Security (Paul O'Neill, February 23, 2005, Pittsburgh Post-Gazette)

If we decided as a society that we were going to put $2,000 a year into a savings account from the day each child was born until he or she reached age 18 -- and if we assume a 6 percent annual interest rate -- each child would have $65,520 at age 18. (The worst return for a 25-year investor in the stock market from 1929 before the crash to 2004 was an average of 6 percent a year.) With no further contributions, again with a 6 percent interest rate, those savings would grow to $1,013,326 at age 65.

If we began to do this now, the first-year cost would be $8 billion; that is $2,000 times the roughly 4 million children born each year. The second year would cost $16 billion and so on until we were contributing $2,000 per year to a savings account for every child from birth until age 18. When fully implemented, the cost would be $144 billion per year. To put this $144 billion per year into context, this year's combined spending for Social Security and Medicare will exceed $750 billion.

What this plan would do is "pre-fund" for the needs of old age. It solves the long-term financing problem for both Social Security and Medicare, allowing for the gradual replacement of programs like Supplemental Security Income and Medicaid and food stamps and housing aid for those over age 65. To make this work, the savings account money would need to be invested -- my suggestion would be through so-called index funds. The administrative costs would be practically nothing because there's no need for a huge separate tax collection bureaucracy; the money would come from the general revenues of the U.S. government.

Likewise, if he's serious here, let's see EJ Dionne get on the Ownership Society bandwagon, Detroit's Creative Bargain (E. J. Dionne, 9/28/07, Real Clear Politics)

The General Motors contract with the United Auto Workers shows how companies and workers can come together when both understand the economic threat facing American manufacturing, and when workers have a place at the table to protect their most important interests. [...]

The UAW is taking a risk, since health care costs could rise faster than the trust fund grows, and since the contract includes fewer protections for non-production workers. But the bigger risk was GM going under or moving yet more jobs overseas. The lesson of The New Treaty of Detroit is that in the face of globalization's challenges, risks and rewards can be shared if there's a will to negotiate them.

Now it's the turn of Democratic candidates to explain how they will be as creative as GM and the UAW.

I don't recall him embracing W's similarly creative solutions.

Posted by Orrin Judd at September 28, 2007 12:00 AM